Narrowing the scope and timeline for class certification: Let’s see who gets to the courthouse first

Gatreaux v. DKW Enterprises, LLC, No. 1-10-3482 (September 22, 2011), a recent opinion by the Illinois Appellate Court, First District, Fourth Division, is the first to spotlight the frantic race to the courthouse that has resulted between plaintiffs seeking class action certification and defendants hoping to avoid trial by tendering complete relief to each class representative, since the Illinois Supreme Court’s decision in Barber v. American Airlines, Inc., 241 Ill. 2d 450 (2011).

Experienced class action litigators have well known that to halt a class action lawsuit, it is best to tender immediate and complete relief to the representative plaintiff in a class action case, prior to class certification. This practice is known as “picking off” a class representative and has the effect of mooting the class action and compelling plaintiff’s counsel to seek another class representative, which is frequently tricky.

In order to avoid mooting a class action each time a tender was offered to a class representative prior to certification, Illinois appellate courts gradually developed the so-called “pick off” exception, under which they would permit a class action to proceed so long as the plaintiffs pursued the action with “reasonable diligence.” Barber, however, recently changed the landscape, by explicitly rejecting the “pick off” exception created by the appellate courts, and instead reaffirmed the viability of the “pick off” rule, under which a tender prior to certification automatically results in the mooting of the class action.

In Barber, a passenger who had purchased a plane ticket from American Airlines (AA) checked two suitcases prior to boarding and was charged a $40 checked baggage fee. When AA subsequently cancelled her flight and the passenger elected not to take another AA flight but instead requested a refund and a cancellation of her ticket, she was refunded the ticket price but not the $40 baggage fee. The passenger filed a class action lawsuit for breach of contract against AA. Before she had the opportunity to file a motion for class certification, AA offered to refund her the $40 fee, and, in spite of her refusal to accept it, deposited $40 to her credit card account. AA moved to dismiss the plaintiff’s complaint as moot. The circuit court granted the motion, but the appellate court reversed.

Applying the “pick off” exception, the appellate court found that, even though the tender of settlement was made prior to any class certification, the plaintiff’s claim could proceed because the plaintiff had exercised “reasonable diligence” in pursuing the action. Our supreme court disagreed and found that, even though the plaintiff had exercised “reasonable diligence,” she could not proceed with her claim because she failed to seek certification of the class prior to being tendered the full relief she requested. In doing so, the supreme court in Barber relied on its prior decision in Wheatley v. Board of Education of Township High School District 205, 99 Ill. 2d 481, 484-85 (1984), noting:

Wheatley teaches that the important consideration in determining whether a named representative’s claim is moot is whether that representative filed a motion for class certification prior to the time when the defendant made its tender. [Citations.] Where the named representative has done so, and the motion is thus pending at the time the tender is made, the case is not moot, and the circuit court should hear and decide the motion for class certification before deciding whether the case is mooted by the tender. [Citations.] The reason is that a motion for class certification, while pending, sufficiently brings the interests of the other class members before the court ‘so that the apparent conflict between their interests and those of the defendant will avoid a mootness artificially created by the defendant by making the named plaintiff whole.’ [Citation.] The situation is different where the tender is made before the filing of a motion for class certification. [Citation.] There, the interests of the other class members are not before the court [citation], and the case may properly be dismissed. [Citation.]

In Gatreaux v. DKW Enterprises, LLC, et al., No. 1-10-3482 (September 22, 2011), the first Illinois appellate court decision to address “picking off” since Barber, the plaintiffs, each former cashiers, cooks, or other hourly-paid employees of one of several Chicago-based McDonald’s franchises, filed a class action complaint against the defendant-owners, alleging that they were not paid their hourly and overtime wages in violation of the Illinois Minimum Wage Law (820 ILCS 105/1 et seq. (West 2006)) and the Illinois Wage Payment and Collection Act (820 ILCS 115/1 et seq. (West 2006)).

In their complaint, the plaintiffs sought, among other things: (1) damages, including all owed overtime and regular wages plus interest; (2) costs and reasonable attorney fees; and (3) a declaration that the defendants willfully violated the two Illinois wage statutes. Before the plaintiffs had an opportunity to seek class certification, the defendants sent a letter of tender to each named class representative offering to pay “all amounts due” for owed wages, plus 2% interest, and reasonable attorney fees and costs incurred by the plaintiffs in pursuing the litigation. After the plaintiffs rejected the tender, the defendants moved for dismissal on mootness grounds. The circuit court granted the defendant’s motion, finding that the plaintiffs had not acted with “reasonable diligence” in pursuing their class certification.

After the circuit court’s dismissal but before the plaintiffs’ filed their appeal, the Illinois Supreme Court decided Barber, rejecting the “reasonable diligence” exception to the “pick off” rule and imposing a rigid time line on class certification. See Barber, 241 Ill. 2d at 457. Although they acknowledged the decision in Barber, the plaintiffs urged the appellate court to reject Barber on public policy grounds or, in the alternative, find that even under Barber they could proceed with their class action, because the tender did not provide them with “full and complete relief.”

The appellate court in Gatreaux adopted the decision in Barber, reiterating that the timing of the class certification was central to determining whether an action was moot. Citing to Barber, the Gatreaux court rejected the plaintiff’s public policy concerns, explaining that the supreme court in Barber itself rejected similar arguments and held that “there is no prohibition against settlements with class members as long as the rights of nonsettling class members are not affected,” and the remaining class members can pursue litigation or bring their claims individually. Applying Barber to the facts of that case, the appellate court in Gatreaux, therefore concluded that, since the defendant’s tender was made before the plaintiffs sought class certification, the action was moot and dismissal was proper.

The appellate court further addressed the plaintiff’s contention that even under Barber dismissal was improper because the tender failed to offer “full and complete relief.” The plaintiffs specifically argued that unlike in Barber and Wheatley where the plaintiffs were “made whole” by the tenders (i.e., in Barber a $40 refund was deposited into the same credit card account the plaintiff-passenger had used to purchase her airline ticket; and in Wheatley, a majority of the plaintiffs-teachers who had been dismissed from work, had been reinstated, prior to certification), here the plaintiffs never actually received or accepted the amounts offered to them.

Therefore, the appellate court was asked to decide what constitutes a full tender after Barber. The response was simple, the full amount of damages sought plus interest.

The court explained that a tender is an unconditional offer of payment by which a party receives all that he or she has sought. Acceptance of a tender is not a prerequisite to dismissing a case on mootness grounds. In addition, where the plaintiffs are offered the full amount of damages sought by their complaint plus a percentage of interest, the tender is sufficient, and the plaintiffs cannot “perpetuate the controversy by merely refusing the tender.”

In coming to this decision, the appellate court relied on several decisions preceding Barber, including Arriola v. Time Insurance Co., 323 Ill. App. 3d 138, 147 (2001), Bruemmer v. Compaq Computer Corp., 329 Ill. App. 3d 755, 763 (2002), Hillenbrand v. Meyer Medical Group, S.C., 308 Ill. App. 3d 381, 389 (1999)) and Cohen v. Compact Power Systems, LLC, 382 Ill. App. 3d 104, 109 (2008).

The Gatreaux court noted that, although Barber criticized these cases for utilizing the “reasonable diligence” exception to the “pick off” rule, it nowhere suggested that the general principle regarding the sufficiency of tenders, articulated by these cases, has been altered, or that a tender alone, without acceptance, is insufficient to moot a class action. Rather, as Gatreaux points out, in Barber, the Illinois Supreme Court found the plaintiff’s class action was moot even though the plaintiff rejected AA’s tender (i.e., that she be refunded her $40 baggage fee and that AA “consider” paying her court costs). The fact that AA actually refunded the plaintiff, despite her rejection of the tender, by crediting $40 to her credit card, played no part in the court’s decision that plaintiff’s claim was moot. Rather, as Gatreaux noted, the Illinois Supreme Court focused on the timing of the tender and found that the plaintiff could not proceed with her claim because she failed to seek class certification prior to AA’s tender.

As an aside, the Gatreaux court noted that any argument regarding the tender’s insufficiency on the basis of its failure to include the plaintiffs’ request for declaratory relief, had already been rejected by several Illinois decisions, including Wheatley, 99 Ill. 2d at 385, and more specifically Gelb v. Air Con Refrigeration and Heating, Inc., 326 Ill. App. 3d 809, 814 (2001), overruled on other grounds by Barber, 241 Ill. 2d at 460.

As the Gelb court explained “while defendants did not supply a declaration that their practice of underpaying the workers was unlawful, it is also true that once the tender is made, plaintiff ostensibly would not be an underpaid worker who shared interests with other class members. As a result, defendants would have nothing illegal to admit with respect to plaintiff’s individual claims, since technically, no wrong would be visited upon plaintiff once his monetary damages were tendered.”

Under these principles, the appellate court in Gatreaux found that the defendants in that case had made a complete tender to the plaintiffs, since their tender exactly matched the request for relief made by the plaintiffs’ complaint. Specifically, the complaint requested an award of compensatory damages, including all regular and overtime pay, owed “in an amount according to proof,” plus interest, as well as an award of all costs and reasonable attorney fees incurred prosecuting the claim. The defendants’ tender mirrored these demands and offered “full monetary relief” for the claims alleged in the plaintiffs’ complaint, plus 2% interest, as well as the payment of all costs and reasonable attorney fees incurred by the plaintiffs in litigating the lawsuit. Under these facts, the court concluded that the tender offered the plaintiffs full relief, and that their failure to file a motion for certification prior to that tender, mooted the action.

Ultimately, Gatreaux illustrates the Illinois Supreme Court’s narrowing of time line for future class certifications. Since a tender offer providing full relief (by offering the full amount of damages sought plus interest) acts to automatically moot a class action, in the future, plaintiffs would be advised to file their motions for class certification, as quickly as they can, possibly even on the same day they file their complaints. ■